There is an interdependent relationship between hedging ^ and speculation^, and no one can leave without sweat. However, if the speculative component is too strong, the number of speculators will greatly exceed the hedging and transfer price risk required. Futures market liquidity will be greatly reduced, and even lead to the collapse of the futures market. For example, in the United States, there are people called Bonk Hunter. In 1979, he used futures trading to control 75 million ounces of silver, which accounted for 50 US dollars of the average annual consumption site of silver in the United States and was calculated at a value of 1.7 billion U.S. dollars. This height accumulation may lead to the silver market being “emptyâ€. Speculators who sell silver futures can only make up from Hunter, who will then be free to raise the price of silver to make short-selling speculators. ^ Undaunted by the huge loss, they are not interested in silver.
If there is no liquidity in a market, it will be sluggish and there will be no market. The liquidity of the futures market means that traders can enter and leave the market unimpeded at any time at their own will. With strong liquidity, the market is "prosperous and the business is in constant flux. The reason why speculators can make the market liquid is because they only want to move fast and fast, and benefit from the short-term changes in commodity prices. The position of speculators in the open market (called buying or selling of futures contracts) often changes, often changing once or twice in three days (from buying to selling, or vice versa).^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The guarantee contract can often flow in the market.
If there are no speculators or a small number of speculators in the open market, the price risk of the hedging category will be left unattended. When his report (the global metal net OMETAL.COM) needed to sell futures to avoid falling prices, there would be very few people who bought no one; when he (the door was to avoid the loss caused by the price increase) When you need to buy futures, you will not sell them or sell them. In the futures market, hedgers seek price protection, speculation, and compliance with the principles of low-cost buying, high-priced selling, and short-term borrowing. The volatility earns profits, and from this point of view, when the price is low, the speculators will increase their demand by increasing their buying power. When the price is high, the speculators will increase their supply and prices will fall as they sell. The role of speculation^ is to stabilize the price of futures market.
In the futures market, hedging is quite different from speculators' hopes, but both can be traded together because, with the exception of the two (many buyers and sellers) who have different views on price trends, It is the leverage provided by the futures market. This leverage allows hedgers to control large amounts of resources with less cash, allowing speculators to make small profits. (
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